Most people hear about wills and trusts, but are unsure which option fits their needs. While both are key estate planning tools, they serve different purposes, depending on your situation.
A will, for instance, outlines how your assets will be distributed after your passing and allows you to appoint guardians for minor children. A trust, on the other hand, can manage and distribute your assets during your lifetime and beyond. Knowing how wills and trusts work will help you choose the right plan for your family’s future.
When They Take Effect
One of the most important differences between a will and a trust is when each one becomes legally effective. A will only takes effect after your death. Until then, it does not control how your assets are managed or distributed.
A trust can take effect as soon as it is created. This allows it to manage certain assets during your lifetime and continue after your passing. If you want an estate planning tool that can provide benefits both now and in the future, a trust may be the right option.
Probate
Another major difference is how each one passes assets to your beneficiaries. A will usually goes through probate, which is the court supervised process of validating the document and distributing property.
A trust can help your estate avoid a time consuming probate, as long as the assets have been properly transferred into it. This can save time and make the transfer process smoother for your loved ones.
Privacy
Once a will enters probate, it may become part of the public record. This means certain details about your estate and how your property is distributed could become accessible.
A trust generally offers more privacy because it usually doesn’t go through probate. As a result, the details of the trust and its distributions often remain confidential.
Control Over Assets
A will usually provides straightforward instructions about who should receive your assets after your death. In many cases, property is distributed to beneficiaries once the estate administration process is complete.
A trust can provide more control over how and when assets are distributed. For example, you can direct that funds be held until a beneficiary reaches a certain age, or used only for specific purposes.
Planning for Incapacity
A will does not help manage your financial affairs if you become incapacitated during your lifetime. It only becomes effective after death.
A trust can help address incapacity planning by allowing a successor trustee to step in and manage trust assets if you are no longer able to do so. This reduces uncertainty during unexpected circumstances.
Complexity and Cost
Wills are generally easier and less expensive to create than trusts. They are often a good starting point for people with straightforward wishes or fewer assets. However, a will needs to be probated which will create significant costs for your beneficiaries and Estate after you die.
Trusts usually require more planning and the transfer of assets. Because of that, the process can be long and costly.
Which One Do You Need?
The right choice depends on what you want your estate plan to accomplish. If you want a simpler document that names beneficiaries and guardians, a will may be enough. If you want to avoid probate, maintain privacy, and manage assets during your lifetime and after death, a trust may be the better fit. In some cases, using both can create a more complete estate plan.
At Michael F. Kanzer & Associates, our attorneys will advise you on which option is best suited to protect your assets and help you draft and execute your will or trust. Contact us today to start building an estate plan that works for you and your loved ones.